IRS Gives Equal Billing to an Adviser Life Insurance Contract: Treats Adviser’s Fee the Same as Under Adviser Annuities
January 17, 2024 by Stephen Kraus
The IRS recently published a private letter ruling (No. 202341002) dealing with the tax treatment of advisory fees paid to an adviser from an “adviser life insurance contract.” Specifically, the letter ruling addressed whether the payment of such fees directly from a life insurance contract will be treated as a distribution from the life insurance contract.
The letter ruling is substantially identical to 19 others issued by the IRS in connection with “adviser annuities.” Consistent with those, the recent letter ruling held that the fees were an integral part of the operation of the life insurance contract and, as such, were not treated as “amounts received” under section 72 of the Internal Revenue Code, i.e., not a distribution from the life insurance contract.